Board Diversity: A Business Imperative

Date: March 9, 2016

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It results in more robust decision-making, stronger corporate governance, less
likelihood of groupthink and better returns for investments.

Increasing attention is being paid to board diversity and women on boards. Why are these matters in
the spotlight? Not so long ago the talk was all about corporate governance, with some digression to
the role of the audit committee. Perhaps the subject is still corporate governance, but with rules
having been tightened and guidelines adjusted, attention has shifted to the people who oversee the
company and make good governance happen – directors who make up the board.

It is essential for the board to be business savvy, capable of overseeing the growth of returns in
addition to the governance that keeps the company steady on its course. Ideally we would be looking
for the collective balance of the board that performs greater than the sum of its parts. That calls for

Another force which increases the importance of diversity in boards is the business environment today,
burgeoning with progress and change. The advance of technology transformed businesses from overthe-
counter to on-the-Net, from selling machines to selling the services machines performed. In every
business, there may be undetected accumulating risks and opportunities to be recognised and seized.
These challenges have become starker and call for response at the topmost level of the company in
the skillset and experience of the board.

All companies would agree that a homogenous board is not good for business, yet it is not obvious
that all boards display diversity. Gender diversity is easy to detect.

A scan of boards of SGX-listed companies shows a glaring lack of gender diversity. Women occupy
only 9.1 per cent of board seats as at June 30, 2015, lower than several Asian markets. How
important is it to raise female participation at board level?


Studies have shown that greater diversity at the board level results in more robust decision-making,
stronger corporate governance, a reduced likelihood of groupthink and better returns for investments,
according to Credit Suisse’s 2014 study of 3,000 companies and NUS Centre for Governance,
Institutions and Organisations’ study on Singapore listed companies in their 2014 Board Diversity

Investors are increasingly using gender as a proxy for cognitive diversity, viewed as an indicator of
future business performance, according to Aberdeen’s Global CIO Anne Richards in her interview
“Diversity best defence against risk” with the Financial Review.

It follows then, that if female participation remains at the current levels, companies in Singapore risk
their leadership being less well regarded than competing investments in a global marketplace. And it
is well recognised that one significant reason for investing in a company’s equity is confidence in the
quality of its management, not just its natural advantages such as location or technology. Without the
talent or the recognition of possessing talent, Singapore companies would have to compete much
harder for global investment.

Lee Suet Fern, a Singaporean independent director on global companies AXA and Sanofi, puts it
aptly: “To ignore them (women) is to risk overlooking qualified candidates in a talent-scarce market
and to miss the chance to enhance the diversity of voices and views that would make for better
corporate governance, more dynamic boards and more business-facing companies.”


There are two direct business benefits that a gender-diverse board brings. It better understands the
perspectives of its female customers and workforce, and having a female leader at the top table
creates a positive role model for other women executives to advance upwards. Both create a stronger
management team with deeper knowledge of its stakeholders.

It is curious that there are companies with no women directors in the banking, insurance, consumer
goods, hotels & restaurants, and property industries despite women making up a large proportion of
their customers and employees. Could not these companies gain better insight into customers’ and
employees’ needs by having women directors, with direct benefits to the bottom line?


A growing interest in sustainability reporting will further add importance to companies’ employment of
women in the workforce and on the board, as gender diversity is tracked under the social aspect of
the company’s risks and opportunities.

At the latest count, close to 1,400 asset owners, investment managers and professional service
partners have signed the United Nations Principles for Responsible Investment. These signatories
include some from Singapore and collectively they represent some US$60 trillion in assets under

Responsible investment codes mandate stakeholder interaction with equity investee companies
regarding issues of concern. On the other side of the coin, sustainability reporting also provides for
stakeholder engagement by companies. Both make good business sense.

It seems like it will be only a matter of time before companies in Singapore find themselves forced to
confront the issue of gender diversity on boards. The alternative of being spared that experience
would mean their investors are not in the global league.


Some companies have considered the question and acted upon their conclusion. Singtel, the largest
company listed in Singapore, has increased the number of women directors to four, making it one of
the companies with the highest participation of women on the board.

Singtel’s chairman, Simon Israel, says: “While gender is only one aspect of diversity, it is an important
one. Experienced women directors bring critical insights to boards and often approach issues
differently to men. This makes for richer discussion, better outcomes and stronger boards.”

Other companies need to think through their own needs and situations, but it is difficult to see how
they might conclude differently.

An approach that might be useful is for companies to consider how well their board is suited for the
decisions that lie ahead for the company. Answering that question may lead to a search for additional
skillsets or different experience which better position the board for strategic decisions to increase the
likelihood of success. Skillsets duplicated or no longer important have to be reprioritised in board
renewal. Regular reviews of this sort make for well performing boards aligned with company strategy
and risk management. It also addresses questions of stewardship of the resources of the
company which are the responsibility of all board members and most directly, the chairman.


In summary, board diversity is a business issue and good stewardship of the company brings the best
resources to bear on the decisions that affect business performance. Companies in many jurisdictions
have come to this conclusion and proactively added diversity including participation of women on their

Given that Singapore thrives in the global market, the way forward is clear. Increasing board diversity
will be a win for women but undeniably a win for business and a win for the economy as well.


(Published in The Business Times on 19 Oct 2015, “Board diversity fosters a healthy balance”)

The Diversity Action Committee is a 15-member committee comprising leaders and professionals from the
private, public and people sectors. The committee was formed to steer and implement initiatives with the
objective of building up the representation of women directors on boards of companies in Singapore.